ECB Bulletin and Powell’s Influence on the Horizon

Recent macroeconomic indicators, including private sector PMIs, continue to fuel bets on a euro area economic recession. However, concerns over elevated inflation could force the ECB to keep interest rates higher for longer. A higher-for-longer interest rate environment would impact borrowing costs and disposable income.

Significantly, a downward trend in disposable income would impact private consumption and the Eurozone economy. Private consumption contributes over 50% to the Eurozone economy. However, a weaker outlook on consumer spending would ease demand-driven inflationary pressure and the need for a higher-for-longer interest rate path.

ECB President Christine Lagarde and Chief Economist Philip Lane are on the calendar to speak on Thursday. References to the economy, inflation, and interest rates will influence buyer appetite for the EUR/USD.

On Wednesday, ECB Chief Economist Philip Lane raised concerns about inflation. Lane’s views suggested the need for a higher-for-longer interest rate path.

Fed Chair Powell and the US Labor Market in Focus

On Thursday, initial jobless claims will garner investor interest. Recent labor market reports fueled bets on the Fed ending its rate hike cycle. A spike in jobless claims would align with sentiment toward the Fed interest rate path.

Economists forecast initial jobless claims to rise from 217k to 218k in the weekend ending November 4.

A weakening labor market environment would affect wage growth and consumer sentiment. Softer wage growth could lead to a downward trend in disposable income, affecting consumer spending. A pullback in consumer spending could ease demand-driven inflation and the need for a hawkish Fed rate path.

Beyond the numbers, Fed Chair Jerome Powell is on the calendar to speak on Thursday. Views on recent labor market reports and the likely effect on Fed interest rate intentions need consideration.

Short-Term Forecast:

Fed and ECB speeches will continue to dictate the near-term trends for the EUR/USD. However, a hawkish Fed could pressure the EUR/USD, considering the euro area macroeconomic backdrop.

EUR/USD Price Action

Daily Chart

The EUR/USD remained above the 50-day EMA while sitting below the 200-day EMA, sending bullish near-term but bearish longer-term price signals.

A EUR/USD break above the 200-day EMA would give the bulls a run at the $1.07838 resistance level.

The ECB Economic Bulletin and central bank speeches will be the focal points on Thursday.

However, a fall through the 50-day EMA and the $1.06342 support level would bring sub-$1.06 into view.

The 14-period Daily RSI, 58.94, suggests a EUR/USD move to the $1.07838 resistance level before entering overbought territory.